Cafe Gratitude selling all Bay Area outposts (including Gracias Madre), in what they dub “legalized extortion”

Via SFist comes a surprising Facebook announcement from Cafe Gratitude owners Matthew and Terces Engelhart. Basically, they’re dissolving the company and shutting down (or selling) all six of their Northern California locations: the Mission, Oakland, Berkeley, San Rafael, Healdsburg, Cupertino and Santa Cruz. Throw in Gracias Madre, and that’s eight locations now on the market. (So yeah, expect people to try to swoop in on that suddenly available Harrison Street Cafe Gratitude location, across the street from Flour + Water, ASAP. Prime real estate, there.)

Do note that all eight restaurants will remain open for the foreseeable future as they look for buyers. Matthew Engelhart estimates it will be three to six months before anything happens.

The reason for the closures, as Cafe Gratitude elaborates in the letter below, is a “series of aggressive lawsuits” surrounding wage and hour disputes that simply cost them too much money.

“We feel like our position is completely defend-able but it’s too costly to defend them,” Matthew Engelhart tells Scoop. “This is the sad news, especially for small businesses, because anyone can come up with a charge.”

“Because it’s so outrageous to settle, we’ve got a system that evokes legalized extortion,” he adds.

With great sadness we are announcing the upcoming closing/sale of all Northern California Café Gratitude’s.

A series of aggressive lawsuits has brought us to this unfortunate choice. Although we believe that we have done nothing wrong and our policies are completely legal, it will cost us too much money to defend them in court. Despite telling the attorneys that brought the lawsuits that the current structure and resources of Café Gratitude are insufficient to sustain and defend our community, they have refused to give up and are forcing us to close.

We appreciate the loyalty of our employees and customers over these past 8 years and are grateful for having had the opportunity to serve each of you. We were happy to tolerate low margins and sustain ourselves on the transformation and personal growth of our people, while providing local organic vegan food to our community in an atmosphere of unconditional love. That commitment is under attack and we are not able to weather this storm.

This process will take a few months so please keep coming in and let’s celebrate our 8 years of success together, we are grateful for you!

We have come to realize that it isn’t how we serve that is most important but rather that we serve.

There are two separate lawsuits at play here, for three plaintiffs. You can view them here and here. The first lawsuit is a response to Cafe Gratitude alleged illegal tip pooling, a violation that came up in conversation surrounding Farina’s new tip policy. The other lawsuit claims a former bookkeeper was on salary, but was supposed to be paid hourly by law and is thus seeking unpaid overtime wages.

Stephen Sommers is the attorney who filed the wage and hour claims. He has a different take on the closures.

“These are not huge cases. There’s no reason, financially, for them to close eight locations,” he says, adding that the lawsuit number is under $200,000 and this is not a class-action suit (yet). “They are not closing these restaurants because of these lawsuits. There’s something else.”

But for the Cafe Gratitude owners, it’s a very bitter pill to swallow.

“For 7 1/2 years we’ve been willing to work and tolerate low margins because our real wealth was in the transformation of our people,” says Engelhart. “And now that’s being threatened by lawsuits.”

And that’s not all: “October was the best month we ever had in the history of the business.”

This post was updated at 12:45pm to include the quotes from Mr. Sommers.